The British Business Case for Avoiding Food Waste
Posted April 4, 2013
I recently returned from a week of traipsing around London to learn what those Brits are up to when it comes to addressing food waste. And let me tell you, they are up to a lot.
What struck me most was the difference in mindset. British companies see a clear business case associated with avoiding food waste not only in their own operations, but in helping both their suppliers and their customers to do the same. With suppliers, maintaining “security of supply” through good business relations is seen as important to future business success in a market where suppliers increasingly have a choice of buyers. With customers, the business case stems from product offerings, brand loyalty, and a general license to operate. Whether warranted or not, British consumers generally hold businesses accountable even for their own waste.
Leaner Business Operations
The business case to reduce waste within operations is clear. The European Union Landfill Directive initiated in 2001 led the United Kingdom to issue a landfill tax that escalates each year, making waste more expensive as time goes on. This has driven businesses to look at both reducing and diverting waste, though they do draw a more explicit distinction between the two (as seen in the pyramid to the right).
On the reduction side, for instance, Marks and Spencer’s established a protocol to mark down all products nearing their expiration date, leading to faster sale of products that might otherwise be put in the bin. M&S also has a protocol to “scan out” its waste – that is, scanning products before tossing them in order to improve visibility of what is thrown away. This has led to more accurate forecasting and a resulting decrease in waste. For anything still left over, M&S now backhauls all of their food scraps from the stores to distribution centers, where they are collected for use in anaerobic digestion. This move to backhauling reduced collection from 492 stores down to 22 distribution centers (and saved 700,000 metric tons of CO2).
While worthwhile, it’s not particularly surprising that reducing waste in a company’s own four walls aligns with existing incentives. More intriguing is that food businesses in the U.K. also see a business case for helping both their suppliers and their customers reduce food waste.
Security of Supply
I repeatedly heard reference to the need for “security of supply,” as companies believe there could be a real threat to the future supply of their products. On one hand, they are concerned that supply could be limited due to constraints on water, land, and the effects of a changing climate. At the same time, in an increasingly global market where suppliers have more options of where to sell, poor business relationships could drive suppliers to sell elsewhere. As a result, retailers such as Sainsbury’s are reaching into their supply chains to examine the impacts of their own practices on the health of their suppliers’ businesses. With the recent controversy over horsemeat in beef, transparency of supply chains has risen in importance. Several people mentioned that this scandal has made the risks of not knowing a product’s origins utterly clear.
Brand Loyalty, Product Offerings, and License to Operate
On the other end of the supply chain, there are a host of reasons that a brand or grocery store would want to help their customers reduce waste. First, there are basic benefits to the brand. Providing consumers with ways to make their food budgets go further makes a brand seem helpful, building brand loyalty. For instance, Sainsbury’s is providing “open life” advice for products that have a long shelf-life until opened, but then last only a limited duration. They pointed out that consumers judge their products regardless of whether the products are stored correctly, so better storage advice helps their own brand reputation. The company also offers “mix and match” promotions instead of “buy one get one free,” giving them the same promotional lift in sales without requiring customers to buy more than they can use of one item. In addition, several companies - The Cooperative, Morrison’s , and ASDA to name a few – have direct consumer campaigns on how to reduce waste through better storage, recipes, and other tips.
Beyond brand value, more direct bottom line benefits were cited. Unilever, for instance, can capitalize on the fact that some of its products are helpful ingredients for using up other food that might go bad, such as mayonnaise and soup bouillon. Retailers see opportunity in selling products that help people preserve food like storage containers, vacuum sealers, and food dehydrators. Smaller portions are another offering that at times makes sense – consumers then are able to buy less volume if that’s all they want, but smaller portions also often bring in a higher dollar-to-ounce ratio.
At a less tangible level, food waste has become such a strong trend in the U.K. that businesses that fail to address it risk losing their license to operate. This may seem extreme until you consider that British consumers rank food waste as a higher concern than food safety. And as one retailer pointed out, “Customers hold us accountable for the fact that they buy too much. It may not be fair, but it is what it is.” So far, companies seem to feel that banding together via the Courtauld Commitment to set targets to reduce food waste has helped avoid both public scrutiny and regulation.
Finally, it’s worth mentioning that there are two outlets for food waste that don’t pencil out as well in the United Kingdom. The first is, unfortunately, food donations. British food companies don’t receive either the enhanced tax deductions or the liability protection that benefit businesses in the U.S. It’s not a surprise, then, that food donations in the U.K. pale in comparison to those by American companies. Second, as a result of various livestock diseases, animal products are banned from compost, making it much more difficult to use this form of disposal. As a result, most “recycling” of food waste happens in the form of anaerobic digestion (which does have a strong business case associated with it due to the Landfill Directive taxes mentioned above, and thus a much more established infrastructure).
The bottom line: reducing food waste can benefit the bottom line. There’s a lot we can learn from the Brits, and we may as well start now.
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